[Albion] Burnley taken over

[dsr-burnley]

I’ve had a load of stick from Burnley fans (and Alan Pace) today so was trying to be nice as didn’t want to fall out with you too.

The interest rates quoted would seem to be about right as MSD Holdings borrowed at 9% themselves last year so will want to make a profit.

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Thank you. Though I have no intention of falling out with anyone - I try and be on best behaviour when visiting other clubs' message boards!

I think this whole deal stinks. I think they have already got £100m out of the club, and the former chairman is complicit. I hope I'm wrong.

 

[osgood]

It's worse than that. It's more like buying a house with a sitting tenant, and the tenant owns the safe with £40k in it, and it's the tenant's money that the new landlord pays the old landlord with.

That would certify the seller insane !
Unless, of course, there is another facet to the deal ...

 

[MattBackHome]

It’s a bit like buying a house for £200k including its contents. One of the contents is a safe which contains £40k.

You take the money from the safe and use that as part payment to the previous house owner.

I guess I will never understand the logic there. That is genuinely mental.

 

[Jim in the West]

Apols - a bit late to this one - but just catching up on some of the media reports.

El Pres knows a lot more about this deal than I do, but I'm just glad I'm not a Burnley fan.

Prior to 31st December they had benevolent local owners, no debt, and £50m in the bank

They now have: Un-proven American owners, the £50m in the bank has gone*, and an interest bill of circa £10m pa. [*the deal structure presumably means this cash went to the former shareholders, and is now effectively a debt receivable from ALK in Burnley's books]

It doesn't look great - will be fascinating to see whether they bring anyone in during the transfer window....and if not, how Dyche reacts. They are gambling on not going down. If they do, and Dyche quits, I'm not sure it'll be that easy to get back up.

 

[blue-shifted]

Apols - a bit late to this one - but just catching up on some of the media reports.

El Pres knows a lot more about this deal than I do, but I'm just glad I'm not a Burnley fan.

Prior to 31st December they had benevolent local owners, no debt, and £50m in the bank

They now have: Un-proven American owners, the £50m in the bank has gone*, and an interest bill of circa £10m pa. [*the deal structure presumably means this cash went to the former shareholders, and is now effectively a debt receivable from ALK in Burnley's books]

It doesn't look great - will be fascinating to see whether they bring anyone in during the transfer window....and if not, how Dyche reacts. They are gambling on not going down. If they do, and Dyche quits, I'm not sure it'll be that easy to get back up.

A massive gamble with the whole club. To achieve what? How much higher are they going to get?

We are so so lucky

 

[elwheelio]

It certainly looks like an arrangement in which the owners just want to take cash from the club every year in consultancy fees and interest. They can't seriously expect to dramatically improve the club's on pitch fortunes. They have massively overperformed for years on a shoestring. Suspect they'll want more of the same but with more cash into their pockets. It could well end in tears.

 

[elwheelio]

A massive gamble with the whole club. To achieve what
? How much higher are they going to get?

We are so so lucky

Exactly. There's not really much incentive for bottom half clubs to do much more than survive. In that sense, and from a business perspective, Mike Ashley has been pretty sensible with Newcastle. Why spend another £100m to maybe go from 15th to 8th for a season or two?

 

[Neville's Breakfast]

It’s a bit like buying a house for £200k including its contents. One of the contents is a safe which contains £40k.

You take the money from the safe and use that as part payment to the previous house owner.

So why didn’t the previous owner take the 40k out of the safe and spend it on a fancy new car ? It’s his money already so why would he accept it as part payment in the sale ?

 

[Kalimantan Gull]

Pardon my ignorance here, maestro, but how are they able to use the £42m that was already in the bank?

Isn't that like me going into the sweetshop, buying a Freddo and using money that was already in the till to pay for it?

I suppose you borrow the 42m, buy the club and pay the loan back with that money. You have to assume that 42m was factored into the cost of the club in the first place. The previous owners could just have taken the 42m and reduced the cost of the sale by the same amount, but I guess that would have 'looked bad' on them.

Ultimately though its the previous owners who get to take that 42m home with them.

 

[dsr-burnley]

So why didn’t the previous owner take the 40k out of the safe and spend it on a fancy new car ? It’s his money already so why would he accept it as part payment in the sale ?

Different tax rules probably . This way (assuming there is no really fancy tax dodging) he pays capital gains tax; £42m taken out as cash would be a dividend or salary subject to income tax.

[Edit] actually there is an even more compelling reason. There are 16% minority shareholders; if the money had been taken as a dividend, Garlick would have had to share it with the others. This way, he can take the lot.

 

[Neville's Breakfast]

Different tax rules probably . This way (assuming there is no really fancy tax dodging) he pays capital gains tax; £42m taken out as cash would be a dividend or salary subject to income tax.

[Edit] actually there is an even more compelling reason. There are 16% minority shareholders; if the money had been taken as a dividend, Garlick would have had to share it with the others. This way, he can take the lot.

Have the minority shareholders objected to this deal ?

 

[MattBackHome]

I suppose you borrow the 42m, buy the club and pay the loan back with that money. You have to assume that 42m was factored into the cost of the club in the first place. The previous owners could just have taken the 42m and reduced the cost of the sale by the same amount, but I guess that would have 'looked bad' on them.

Ultimately though its the previous owners who get to take that 42m home with them.

Yeah thanks it took me a long time to work that one out. Makes sense for the old shareholders to want to walk away with as much cash as possible I suppose.

 

[Danny Wilson Said]

I fear we'll all be laughing on the other side of our faces when 100s of 1000s of kids in the Far East are walking around in Burnley shirts and everyone's favourite underdogs are playing in the Champions League.

 

[osgood]

I fear we'll all be laughing on the other side of our faces when 100s of 1000s of kids in the Far East are walking around in Burnley shirts and everyone's favourite underdogs are playing in the Champions League.

or maybe, we will be feeling sympathy for the "new" Bury FC ?

 

[Silverhatch]

I fear we'll all be laughing on the other side of our faces when 100s of 1000s of kids in the Far East are walking around in Burnley shirts and everyone's favourite underdogs are playing in the Champions League.

Debt financing Manchester United is one thing but leveraging Burnley's assets and goodwill is a totally different (almost literally) ball game. These American owners are going to have to sweat this Lancastrian asset very assiduously.

 

[Jim in the West]

So why didn’t the previous owner take the 40k out of the safe and spend it on a fancy new car ? It’s his money already so why would he accept it as part payment in the sale ?

Legally the £40m (nb: The Athletic reported this as £55m, by the way) belonged to the company, not the shareholders. Obviously the shareholders could have declared a £40m dividend and received the cash in that way. But it seems they wanted to sell....

If I understand the deal correctly, the new owners have bought Burnley FC. They then borrowed £40m from Burnley FC, which was used as part of the payment to the company's previous owners. So, in Burnley FC's balance sheet, instead of £40m cash they now have a debt due from ALK of £40m. At some stage in the future this debt will be repayable by ALK to Burnley FC.

In total, the new owners have borrowed circa £135m....£80m+ from Michael Dell, and circa £50m from Burnley FC. They put in around £15m of their own money. That's how they managed to pay £150m for 84% of the club. It makes sense to the new owners, provided they can pay the interest on the loans. The interest, of course, will come out of the profits generated by Burnley FC. Whether it makes sense for the football club itself remains to be seen. On the face of it, if they're relegated the risks to the club are far, far greater now than they were pre-Christmas.

It's pretty much the same approach the Glazers used to acquire MUFC. In the case of Man Utd, however, the Glazers acquired pretty much the biggest global sporting brand. It'll be interesting to see if Burnley fans create a new "FC Burnley" club in protest....

 

[Neville's Breakfast]

Legally the £40m (nb: The Athletic reported this as £55m, by the way) belonged to the company, not the shareholders. Obviously the shareholders could have declared a £40m dividend and received the cash in that way. But it seems they wanted to sell....

If I understand the deal correctly, the new owners have bought Burnley FC. They then borrowed £40m from Burnley FC, which was used as part of the payment to the company's previous owners. So, in Burnley FC's balance sheet, instead of £40m cash they now have a debt due from ALK of £40m. At some stage in the future this debt will be repayable by ALK to Burnley FC.

In total, the new owners have borrowed circa £135m....£80m+ from Michael Dell, and circa £50m from Burnley FC. They put in around £15m of their own money. That's how they managed to pay £150m for 84% of the club. It makes sense to the new owners, provided they can pay the interest on the loans. The interest, of course, will come out of the profits generated by Burnley FC. Whether it makes sense for the football club itself remains to be seen. On the face of it, if they're relegated the risks to the club are far, far greater now than they were pre-Christmas.

It's pretty much the same approach the Glazers used to acquire MUFC. In the case of Man Utd, however, the Glazers acquired pretty much the biggest global sporting brand. It'll be interesting to see if Burnley fans create a new "FC Burnley" club in protest....

Clear explanation but very worrying for Burnley fans

 

[Mackenzie]

Clear explanation but very worrying for Burnley fans

I’ve just had a quick glance at their forum. It seems anyone with a dissenting opinion about the new ownership is being shot down, the argument being that the new owners are only just into their tenure and that patience is the order of the day.

By and large, the Burnley fans seem a trusting lot.

 

[blue-shifted]

I’ve just had a quick glance at their forum. It seems anyone with a dissenting opinion about the new ownership is being shot down, the argument being that the new owners are only just into their tenure and that patience is the order of the day.

By and large, the Burnley fans seem a trusting lot.

Go back on in a year

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[zefarelly]

Different tax rules probably . This way (assuming there is no really fancy tax dodging) he pays capital gains tax; £42m taken out as cash would be a dividend or salary subject to income tax.

[Edit] actually there is an even more compelling reason. There are 16% minority shareholders; if the money had been taken as a dividend, Garlick would have had to share it with the others. This way, he can take the lot.

A friend is a minoroity share holder, he has a meeting with others and new chaiman soon, apparently the new guys CV's look good, no assets to strip really, intentions seemingly sound . . may possibly be looking for total control so they can pay themselves all the dividends . . . . time will tell, but it doesn't look 'bad' . . . . yet.